Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" width="353">
For December, the National Activity Index (CFNAI) from the Chicago Federal Reserve Bank continued lower into recession territory. The latest reading of -3.26 was near it&#39;s historic low. Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index of -2.40 was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2009.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
Each category of the index including employment, production, income, consumption &amp; housing made a negative contribution to the November index.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during November to its lowest level since early 1997. The steel, machinery and resource sectors all were weak but the auto sector ticked up very slightly.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>


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For December, the National Activity Index (CFNAI) from the Chicago Federal Reserve Bank continued lower into recession territory. The latest reading of -3.26 was near it's historic low. Since 1970 there has been a 75% correlation [...]

Chicago Fed Index Well Into Recession Territory

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" width="353">
The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of -5.0% was near the largest rate of decline since 1990.
Five of the ten components of the leading index fell last month with the largest declines coming from lower building permits, shorter hours worked and easier vendor performance. Higher initial claims for jobless insurance also subtracted a sharp 0.15 percentage points from the leaders and consumer expectations were about unchanged. Faster money supply growth added back one percentage point to the m/m change in the leading index and a steeper yield curve added another 0.2 points.
The breadth of one-month increase amongst the leaders&#39; 10 components improved to 50% but over a six-month period the breadth of gain amongst the components remained stuck at a quite low 30%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" width="353">
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline followed an unrevised 0.3% November drop an it was the tenth of the year. Three quarters of the index components fell m/m but over six months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and over the last ten years there has been a 76% correlation between this y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The ratio of coincident-to-lagging indicators (a measure of economic excess) fell slightly to its lowest level since 1975.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board reported that the December composite index of leading economic indicators rose 0.3% after an unrevised 0.4% November decline. The peak for the index was in July of last year and the six-month percent change of [...]

U.S. Leading Indicators Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" width="353">
Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than reported initially. Consensus expectations had been for sales of 4.40M homes. Total sales include sales of condos and co-ops.
Median home prices fell yet again during December. The 2.7% (NSA) decline followed a 3.3% November drop that was slightly deeper than initially reported. It was the sixth consecutive monthly drop and it lowered prices by 15.3% from December of 2007. Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate there was a 9.3 months&#39; supply on the market which was the lowest since early during 2007. For single-family homes the inventory fell m/m to an 8.7 months supply at the current sales rate which also was the lowest since 2007.
Last month, sales of existing single-family homes recovered nearly all of the November decline with a 7.0% increase. Nevertheless, sales of existing homes remained down by nearly one-third from their peak in mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" width="353">
By region, home sales in the West posted the strongest gain in December with a 13.6% rise. This gain recouped all of the declines during the prior two months and returned sales to the upward trend line that has been in place since the low in October of 2007. Sales in the South also gained 7.4% versus November but that level was the series&#39; low for this cycle. Sales in the Midwest also rose by 4.0%. That too was off the series&#39; low. Sales in the Northeast fell 1.4% after a huge 12.0% November drop. Single family home sales here were at their lowest since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
</body>
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Could the decline in home sales be stabilizing, perhaps due to lower prices? According to the National Association of Realtors, sales of existing homes rose 6.5% last month to 4.740M. The 9.4% November decline was slightly deeper than [...]

U.S. Existing Home Sales Rose Last Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126a.jpg" align="left" border="0" height="265" width="353">
Could the decline in home sales be stabilizing, perhaps due to
lower prices? According to the National Association of Realtors, sales
of existing homes rose 6.5% last month to 4.740M.
The 9.4% November decline was slightly deeper than reported initially.
Consensus expectations had been for sales of 4.40M homes. Total sales
include sales of condos and co-ops.
Median home prices fell yet again during
December. The 2.7% (NSA) decline followed a 3.3% November drop that was
slightly deeper than initially reported. It was the sixth consecutive
monthly drop and it lowered prices by 15.3% from December of 2007.
Prices have fallen 23.4% since their peak in June 2007.
The number of unsold homes (condos &amp; single-family) on
the market dropped a sharp 11.7% (-7.5% y/y). At the current sales rate
there was a 9.3 months' supply on the market which was the lowest since
early during 2007. For single-family homes the inventory fell m/m to an
8.7 months supply at the current sales rate which also was the lowest
since 2007.
Last month, sales of existing single-family homes recovered
nearly all of the November decline with a 7.0% increase. Nevertheless,
sales of existing homes remained down by nearly one-third from their
peak in mid-2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West posted the strongest gain in
December with a 13.6% rise. This gain recouped all of the declines
during the prior two months and returned sales to the upward trend line
that has been in place since the low in October of 2007. Sales in the
South also gained 7.4% versus November but that level was the series'
low for this cycle. Sales in the Midwest also rose by 4.0%. That too
was off the series' low. Sales in the Northeast fell 1.4% after a huge
12.0% November drop. Single family home sales here were at their lowest
since 1992.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">December</th>
<th scope="col">y/y %</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,740</td>
<td>-3.5</td>
<td>4,450</td>
<td>4,910</td>
<td>4,897</td>
<td>5,672</td>
<td>6,508</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>720</td>
<td>-14.3</td>
<td>730</td>
<td>840</td>
<td>842</td>
<td>1,008</td>
<td>1,090</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,040</td>
<td>-10.3</td>
<td>1,000</td>
<td>1,160</td>
<td>1,129</td>
<td>1,331</td>
<td>1,491</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,740</td>
<td>-11.2</td>
<td>1,620</td>
<td>1,960</td>
<td>1,863</td>
<td>2,240</td>
<td>2,576</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>31.6</td>
<td>1,100</td>
<td>950</td>
<td>1,066</td>
<td>1,093</td>
<td>1,353</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,260</td>
<td>-1.4</td>
<td>3,980</td>
<td>4,320</td>
<td>4,345</td>
<td>4,958</td>
<td>5,703</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>175,400</td>
<td>-15.3</td>
<td>180,300</td>
<td>207,000</td>
<td>197,217</td>
<td>216,617</td>
<td>222,000</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Rose
Slightly 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126c.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported that the December composite
index of leading economic indicators rose 0.3% after an unrevised 0.4%
November decline. The peak for the index was in July of last year and
the six-month percent change of -5.0% was near the largest rate of
decline since 1990.
Five of the ten components of the leading index fell last
month with the largest declines coming from lower building permits,
shorter hours worked and easier vendor performance. Higher initial
claims for jobless insurance also subtracted a sharp 0.15 percentage
points from the leaders and consumer expectations were about unchanged.
Faster money supply growth added back one percentage point to the m/m
change in the leading index and a steeper yield curve added another 0.2
points.
The breadth of one-month increase amongst the leaders' 10
components improved to 50% but over a six-month period the breadth of
gain amongst the components remained stuck at a quite low 30%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126d.jpg" align="right" border="0" height="265" width="353">
The leading index is based on actual reports for eight
economic data series. The Conference Board initially estimates two
series, orders for consumer goods and orders for capital goods.
The coincident indicators fell again. The 0.5% decline
followed an unrevised 0.3% November drop an it was the tenth of the
year. Three quarters of the index components fell m/m but over six
months 25.0% rose. Year-to-year the coincident indicators fell 2.8% and
over the last ten years there has been a 76% correlation between this
y/y change and real GDP.
The lagging index fell 0.4% after no change in November. The
ratio of coincident-to-lagging indicators (a measure of economic
excess) fell slightly to its lowest level since 1975.
Visit the Conference Board's <a href="http://www.conference-board.org">site</a> for
coverage of leading indicator series from around the world.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business
Cycle Indicators</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Sept. 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.3</td>
<td>-0.4</td>
<td>-1.0</td>
<td>-5.0</td>
<td>-2.7</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>-0.3</td>
<td>0.3</td>
<td>-2.8</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.4</td>
<td>0.0</td>
<td>0.1</td>
<td>2.9</td>
<td>2.8</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Chicago Fed Index Well Into
Recession Territory 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126e.jpg" align="left" border="0" height="265" width="353">
For December, the National Activity Index (CFNAI) from the
Chicago Federal Reserve Bank continued lower into recession territory.
The latest reading of -3.26 was near it's historic low. Since 1970
there has been a 75% correlation between the level of the index and the
q/q change in real GDP.
The three-month moving average of the index of -2.40
was at its lowest level since January of 1982.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2009.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
Each category of the index including employment, production,
income, consumption &amp; housing made a negative contribution to
the November index.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during November to its lowest level
since early 1997. The steel, machinery and resource sectors all were
weak but the auto sector ticked up very slightly.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December '07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-3.26</td>
<td>-2.78</td>
<td>-0.96</td>
<td>-1.69</td>
<td>-0.39</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.40</td>
<td>-2.56</td>
<td>-0.71</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Canada's Mixed Inflation Picture... 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126f.jpg" align="left" border="0" height="265" width="353">
While headline inflation continues to lose steam in Canada as
it does everywhere else in the world, Canada&#8217;s core rate is not on that
same page. Over three-months core inflation has escalated to a pace of
+2.6% from under 2% over previous key horizons (see table). By
comparison, Canada&#8217;s CPIx, that excludes eight volatile categories
shows inflation remains steady at a pace of 2.2% to 2.4%. This is not a
question about inflation spiking but a question about what sort of
momentum inflation now has in Canada and what pressures the bank of
Canada faces in setting policy. . 
 

The headline rate points clearly lower, with inflation down by
6.1% over three months (annualized) or up by just 1.2% Yr/Yr. Both of
those are good results. The dropping and negative three-month and
six-month results suggest that there may be more relief in inflation to
be passed on to core and nonvolatile items in the months ahead. But for
now Canada&#8217;s main inflation trends as depicted by the core or CPIx are
best viewed as moderate and steady. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Canada's
CPI and Core Inflation</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% MO/MO</td>
<td colspan="4">% saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol"> All Items</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>-6.1%</td>
<td>-2.1%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td class="firstcol"> All Items SA</td>
<td>-0.4%</td>
<td> -0.3%</td>
<td>-0.6%</td>
<td>-5.1%</td>
<td>-1.6%</td>
<td>1.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; CPI Core</td>
<td>0.1%</td>
<td> 0.5%</td>
<td>0.0%</td>
<td> 2.6%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol"> All items Excl 8
Volatile (CPIx)</td>
<td>-0.1%</td>
<td> 0.6%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td> 2.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol"> RPIxseas food</td>
<td>-0.3%</td>
<td> 0.6%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.9%</td>
<td>4.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol"> Food &amp; Non
Alcohol Bev</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.6%</td>
<td>7.7%</td>
<td> 8.7%</td>
<td> 7.2%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol"> Shelter</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.5%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol"> Clothing &amp;
Footwear</td>
<td>-0.3%</td>
<td> 0.4%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-3.0%</td>
<td>-2.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol"> Education</td>
<td> 0.2%</td>
<td>0.2%</td>
<td>0.7%</td>
<td> 4.6%</td>
<td> 3.8%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol"> Health &amp;
Personal Care</td>
<td>0.2%</td>
<td> 0.5%</td>
<td>0.1%</td>
<td>3.0%</td>
<td> 3.4%</td>
<td> 2.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Transportation</td>
<td> -0.6%</td>
<td> -0.7%</td>
<td>-0.8%</td>
<td>-8.1%</td>
<td>-3.8%</td>
<td>0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> A
RED highlight indicates
inflation accelerating from pace of previous horizon</td>
</tr>
</tbody>
</table>
Deterioration in World Trade
Continues: the News from Sweden 
by <a href="/comment/Curley.html">Louise
Curley</a> January 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090126g.jpg" align="left" border="0" height="265" width="353">
Last week, Robert Brusca noted how the global slowdown was
affecting international trade by citing Italy's trade data. Further
evidence of the decline in world trade became available today with the
release of December trade data for Sweden.
Sweden reported a 12,930 million kronor decline in imports and
a 15,259 decline in exports, resulting in an improvement in its balance
of trade of 7,479 million kronor for the month of December. But from
the standpoint of world trade the fewer exports and fewer imports meant
a decline in world trade activity of 18,189 million kronor or $2,760
million.
The attached chart shows the sum of the changes in Sweden's
exports and imports over the past five years. The data showed little
trend until April of this year. Since then the down trend has been
dramatic.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SWEDEN&nbsp;</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">M/M chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance of Trade
(Millions Kroner)</td>
<td>10163.14</td>
<td>2697.76</td>
<td>7470.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Export&nbsp;&nbsp;
(Millions Kroner)</td>
<td>84355.39</td>
<td>89714.62</td>
<td>-5259.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;&nbsp;
(Millions Kroner)</td>
<td>74192.25</td>
<td>87021.86</td>
<td>-12829.61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions Kroner)</td>
<td>18188.84</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange rate
(Kroner/US$)</td>
<td>8.0038</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Exports Plus
Change in Imports&nbsp; (Millions US$)</td>
<td>2272.53</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit PMIs for the Euro
Area </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Hooray! The MFG and Services PMIs for Europe in January have bounced. It’s too soon to call it a bottom but since they are bouncing off historic- or near-historic lows, maybe we have seen the worst of decay. Even if that is true it is [...]

PMI Indices for EMU Bounce – Dead Cat or Live One?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" width="353">
The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It&#39;s easy to now generate an estimate that economic activity fell at a 5.1% annual rate last quarter, which indeed is the current Consensus forecast. The range of forecasts extends, however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus would be the fastest since the middle of the 1981-82 recession. Peak-to-trough activity declined during that recession by 2.9% reflecting a pattern of sharp decline early, then nine months of stagnation. This time no such pattern is foreseen by Consensus estimates. Another sharp drop in GDP is expected for this quarter, 1Q09, then a slight decline in 2Q. A downturn following that pattern would make it severe and the harshest since the end of WWII.The Recession in Perspective from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" width="353">
The table below contains a set of estimates for the 4Q GDP components, generated mostly from the monthly data that already is available. As might be expected, consumer spending and housing lead the downturn. Developing estimates for the worst case outcome of a 7.5% decline in activity is relatively easy by just changing the expectation for consumer spending to -8.0%, perhaps due to weaker vehicle sales, and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with quarterly gains of 1.0% to 2.0%. Persistent declines in consumer spending coupled with further weakness in housing would easily unravel those expectations. Moreover, lagged declines in business investment and weaker exports due to recessions abroad could add to any lack of forward economic momentum. However, there is the potential for some upside. Pent-up demand for consumer durables could be unleashed with the huge amount of monetary stimulus already in place and an easing of tight credit conditions.
In this era of recession and weak growth, price inflation seems not to be an issue. Growth in the GDP chain prices is expected to drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories (Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports (Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The 4Q 08 figures for Gross National Product will be available next Friday at 8:30 A.M. As always, the data will be a key gauge for measuring the current shape of the economy. And the news is not likely to be pleasant reading. It's [...]

Consensus Forecast for 4Q GDP: Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123b.jpg" align="left" border="0" height="265" width="353">
The 4Q 08 figures for Gross National Product will be available
next Friday at 8:30 A.M. As always, the data will be a key gauge for
measuring the current shape of the economy. And the news is not likely
to be pleasant reading. It's easy to now generate an estimate that
economic activity fell at a 5.1% annual rate last quarter, which indeed
is the current Consensus forecast. The range of forecasts extends,
however, from -2.0% to -7.5%.
By itself, the magnitude of the drop expected by Consensus
would be the fastest since the middle of the 1981-82 recession.
Peak-to-trough activity declined during that recession by 2.9%
reflecting a pattern of sharp decline early, then nine months of
stagnation. This time no such pattern is foreseen by Consensus
estimates. Another sharp drop in GDP is expected for this quarter,
1Q09, then a slight decline in 2Q. A downturn following that pattern
would make it severe and the harshest since the end of WWII.The
Recession in Perspective from the Federal Reserve Bank of
Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123c.jpg" align="right" border="0" height="265" width="353">
The table below contains a set of estimates for the 4Q GDP
components, generated mostly from the monthly data that already is
available. As might be expected, consumer spending and housing lead the
downturn. Developing estimates for the worst case outcome of a 7.5%
decline in activity is relatively easy by just changing the expectation
for consumer spending to -8.0%, perhaps due to weaker vehicle sales,
and eliminating the addition from an improved trade deficit.
General expectations are for a subpar, 2H recovery with
quarterly gains of 1.0% to 2.0%. Persistent declines in consumer
spending coupled with further weakness in housing would easily unravel
those expectations. Moreover, lagged declines in business investment
and weaker exports due to recessions abroad could add to any lack of
forward economic momentum. However, there is the potential for some
upside. Pent-up demand for consumer durables could be unleashed with
the huge amount of monetary stimulus already in place and an easing of
tight credit conditions.
In this era of recession and weak growth, price inflation
seems not to be an issue. Growth in the GDP chain prices is expected to
drop to 1.0% by 2010 where it is expected to remain in 2011.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.S.
GDP Components (%, AR)</th>
<th scope="col">4Q (Estimate)</th>
<th scope="col">GDP Weight</th>
<th scope="col">3Q</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-5.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>-6.0</td>
<td>.70</td>
<td>-3.8</td>
<td>2.8</td>
<td>3.0</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>-20.0</td>
<td>.03</td>
<td>-16.1</td>
<td>-17.9</td>
<td>-7.1</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Investment</td>
<td>-15.0</td>
<td>.12</td>
<td>-1.7</td>
<td>4.9</td>
<td>7.5</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Spending</td>
<td>3.0</td>
<td>.17</td>
<td>5.8</td>
<td>2.1</td>
<td>1.7</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventories
(Contribution to GDP Growth)</td>
<td>0.0</td>
<td>--</td>
<td>0.8</td>
<td>-0.4</td>
<td>-0.0</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Exports
(Contribution to GDP Growth)</td>
<td>1.0</td>
<td>--</td>
<td>1.1</td>
<td>0.6</td>
<td>-0.0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
 PMI Indices for EMU Bounce &#8211; Dead
Cat or Live
One?
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090123a.jpg" align="left" border="0" height="265" width="353">
Hooray! The MFG and Services PMIs for Europe in January have
bounced. It&#8217;s too soon to call it a bottom but since they are bouncing
off historic- or near-historic lows, maybe we have seen the worst of
decay. Even if that is true it is a far cry from saying we are about to
embark on recovery. 
 

What it means - At a reading of 34 for MFG, the sector is
telling us that about 34% of the industries are expanding&#8230; (That is
strictly speaking an improper interpretation since the PMI reading is
all the &#8216;up&#8217; readings plus &#8216;half the unchanged responses&#8217; and there are
myriad ways to get that result. A given PMI reading does not tell you
how many, or which proportion, of industries are expanding. But the
reading of 34 is &#8216;as if&#8217; 34% were rising and the rest falling although
fewer may be rising and twice the residual might be unchanged. I will
use this short hand of treating the PMI as if it were an &#8216;up only&#8217;
index for simplicity but the reader should understand that the truth is
a bit more complex- I think nothing is lost by this expositional
device.). For services the reading of +42 is coming off that (shorter)
series&#8217; all-time low. 
 

Lots of weakness ahead - In any event it is clear that these
two measures can rise for some time and still not get back to neutral
(a reading of 50 is neutral- half the sectors expanding, half
contracting). 
 

&#8216;Neutral&#8217; is not &#8216;normal&#8217; - And of course &#8216;neutral&#8217; is not the
same as &#8216;normal&#8217;. When you put your car in &#8216;neutral&#8217; is neither in
&#8216;drive&#8217; nor &#8216;reverse&#8217;. If we were to average what gear your car were in
most of the time the average would not be close to neutral. Similarly,
since July 1998 when the services measure was launched it has averaged
54.2. Over the same span the MFG index has averaged 52. On balance more
sectors are expanding than contracting in normal times. So the current
readings are a very great distance away from being &#8216;normal&#8217; and it
should take a good deal of time to get back to normal. 
 

Diffusion increases do not necessarily mean that output
increases - When these diffusion indices rise, until they surpass a
reading of 50, they are indicating contraction at a slower pace but
still contraction and not expansion.. For now the PMIs are saying that
the worst &#8211; most severe phase of the contraction - is behind us, not
that recession is ending. And that is the message only if the December
bottoms stay in place and are not replaced by new weaker readings. 
 

More weakness ahead - Rest &#8216;assured&#8217; that more declines lies
ahead for conventional economic variables even if the diffusion indices
continue to rise from their lows. 
 

Diffusing as Mr Sensitivity - Diffusion readings are very
valuable because they are so timely and because they are sensitive.
Formally the PMI indices are measures are gauges of the BREADTH not of
its strength. But everyone treats theses measure of breadth as if they
are of strength. Financial experts are well aware that is not so. For
stock markets analysts (for example) always looked at big &#8216;up&#8217; or
&#8216;down&#8217; days in the stock indices to see if the breadth reinforced the
trend or not. Breadth in fact is not the same as strength &#8211; but they
are highly correlated. So again be careful how use diffusion data. They
often are the first whiff of slowdown or of bottoming. But they are
indicators and are not real economic variables so be careful how you
interpret them. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the Euro
Area 15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jan-09</td>
<td>34.53</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Dec-08</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">Nov-08</td>
<td>35.58</td>
<td>42.47</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr class="odd">
<td colspan="3">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>36.85</td>
<td>42.62</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>41.74</td>
<td>45.19</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>46.51</td>
<td>47.93</td>
</tr>
<tr class="odd">
<td colspan="3">126-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.87</td>
<td>42.06</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body></html>

Consensus Forecast for 4Q GDP:Activity Down 5%

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090122i.jpg" align="left" border="0" height="265" width="353">
E-Zone orders are dropping sharply in November. Based on some
more topical country level reports, it is not surprising that the EMU
orders series made another sharp fall &#8211; and more those lie ahead.
Today, in fact, the UK CBI survey of industry posted another sharply
weaker result with its up minus down diffusion index falling to -48 in
January compared to -35 in December. That&#8217;s right, in January.
Diffusion data are generally out a month or more ahead of the actual
underlying series that they describe and, as such, they provide a road
map of where we are headed. Still, the variables themselves tell the
actual story of industry. 
 

In November the EMU series is telling us of increased pain in
the zone. The carnage is widespread. For Germany, France, Italy and the
UK Yr/Yr orders are dropping in November by 20% or more from November
of one year ago. In the quarter to date (Q4) the country level growth
rates for orders are more like a negative 50% at an annual rate
compared to Q3 2008. 
 

The weakness is spread more or less equally across domestic
and foreign orders in the EMU series. Foreign orders are down by more
over 12-months but the drop in November is worse for domestic orders. 
 

For the moment we are in the worst of the grip of the
downturn. As we admit this, the international banking crisis is not
getting any better. The &#8216;Dutch boys&#8217; with their fingers in the dikes
are calling out for more recruits --for more stop-gap plans. Others are
crying out for a more permanent solution and for mindful attention to
what all this interventionism will mean for the future. The US has just
completed its transition to new leadership. Japan is eroding faster
after showing some resilience. The strength in the yen is finally
creating more distress there. The data from the industrial sector in
EMU are telling. The pressure on the financial sector is bad and it is
going to get worse. We were already in a financial mess before this
recession began. Now the recession is global in nature and it is going
to spawn and spread the usual credit mess that comes hand in hand with
recession- and this recession is severe. So be prepared, because things
will get worse... That is the main message from the day&#8217;s weak
industrial data in Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">E-zone-13 and UK Industrial Orders And Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-1.9%</td>
<td>-17.0%</td>
<td>-17.0%</td>
<td>-10.5%</td>
<td>-8.6%</td>
<td>-2.6%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-1.4%</td>
<td>-0.7%</td>
<td>-1.2%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-5.8%</td>
<td>-6.7%</td>
<td>-5.3%</td>
<td>-5.2%</td>
<td>-1.5%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:MFG</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-4.5%</td>
<td>-5.7%</td>
<td>-5.4%</td>
<td>-47.3%</td>
<td>-40.3%</td>
<td>-27.6%</td>
<td>-28.3%</td>
<td>-21.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-7.0%</td>
<td>-5.5%</td>
<td>-6.0%</td>
<td>-53.6%</td>
<td>-38.7%</td>
<td>-28.6%</td>
<td>-26.9%</td>
<td>-20.5%</td>
<td>-12.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-3.5%</td>
<td>-6.9%</td>
<td>-5.9%</td>
<td>-48.9%</td>
<td>-46.5%</td>
<td>-30.3%</td>
<td>-32.3%</td>
<td>-24.8%</td>
<td>-18.9%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany (MFG):</td>
<td>-7.2%</td>
<td>-7.1%</td>
<td>-8.0%</td>
<td>-60.3%</td>
<td>-39.7%</td>
<td>-37.5%</td>
<td>-29.6%</td>
<td>-24.4%</td>
<td>-16.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France(Ind):</td>
<td>-5.7%</td>
<td>-11.8%</td>
<td>0.6%</td>
<td>-50.8%</td>
<td>-55.2%</td>
<td>-33.7%</td>
<td>-38.5%</td>
<td>-25.5%</td>
<td>-18.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy (Ind):</td>
<td>-6.3%</td>
<td>-6.6%</td>
<td>-3.8%</td>
<td>-49.7%</td>
<td>-39.0%</td>
<td>-27.2%</td>
<td>-23.2%</td>
<td>-21.1%</td>
<td>-12.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; UK (Engineering Ind):</td>
<td>-8.4%</td>
<td>-24.0%</td>
<td>28.8%</td>
<td>-35.6%</td>
<td>-35.3%</td>
<td>-38.9%</td>
<td>-35.2%</td>
<td>-21.7%</td>
<td>-8.9%</td>
</tr>
</tbody>
</table>
</body></html>

E-Zone orders are dropping sharply in November. Based on some more topical country level reports, it is not surprising that the EMU orders series made another sharp fall – and more those lie ahead. Today, in fact, the UK CBI survey of [...]

E-Zone Orders Drop Sharply...Again

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

260122Z1.jpg

**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

260122Z2.jpg

**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

260122Z3.jpg

**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

260122Z4.jpg

**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

260122Z5.jpg

**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

260122Z6.jpg

This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

260123E.jpg

The S&P PMIs for January show flash readings that indicate broadly stronger conditions across the early reporters in this table. Exceptions are the European Monetary Union as a whole with its composite reading weaker and France with its composite reading weaker, but Germany, the United Kingdom, Japan, Australia, India, and the United States all have composite readings that are stronger month-to-month in January. With these eight countries, there are 24 readings in each period, three for each country: a composite, one for manufacturing, and one for services. Among these 24 readings, only five of them were weaker month-to-month in January. Of course, this follows a December when only 6 of the readings were stronger month-to-month.

The sequential readings, that we calculate only off hard data (which means that calculations are done from December backward) are still mixed. Substantially weaker conditions period-to-period are reported comparing three-months to six-months. Over three months, only nine of the 24 readings are stronger whereas over six months only one of the 24 readings is weaker when compared to the 12-month average. Over 12 months, the average is stronger than it was one-year ago in 15 of the 24 readings. 

Only the United States and France have service sectors that are below their medians over this period back to 2022. Only France and India have composite readings that are below their respective medians over this period. But by comparison, there are very strong composite readings as well. There is a 91-percentile standing on the composite in Australia, an 87-percentile standing in Japan and the United Kingdom. The German composite has a 79-percentile standing.

The recent data have been running sporadically hot and cold, making it difficult to make sense out of what's happening. But broadly, it's clear that the PMIs in the European Monetary Union have been working their way higher and this is the general theme.

For the 8 reporters in the table back to January 2022, all of them except India show weaker manufacturing readings in January 2026 than what they showed in January 2022. But January 2022 was, of course, part of the COVID recovery move. Manufacturing in the European Monetary Union slipped from its high point over this period to its low point around mid-2023.

260123.jpg

Looking at point-to-point changes over the last three months, we find 3-sector cumulative drops in the United States, the European Monetary Union, and Germany. India has two sectors weakening with a decline in its composite as well as its manufacturing reading. Meanwhile, all the rest of the readings in the table over these three months show improved results. On a broad basis, we have to conclude there's more strength than weakness. However, since the weakness is concentrated and widespread and the largest economic units: the United States, the European Monetary Union, and the German economy, it's better to refer to the last three months as generating mixed economic statistics.

Looking forward, conditions are still hard to sort out. There's this obvious recovery in January after an equally obvious weak spot in December. The two of them cancel one another out in some sense. The average composite reading for all countries in the table shows some improvement in the manufacturing sector but waffling on the services sector. We get the same sort of readings looking at sequential averages; they do more of waffling than any kind of clear trend. On balance, the S&P readings don't give us a lot to go on this month. The survey is a bounce-back after a weak December and that's good news. But that doesn't give us a good handle on the trend yet.

S&P Flash PMIs Rebound But Emit No Clear Signal

Sandy Batten

260122N8.jpg

260122C8.jpg

Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

260122O8.jpg

260122P8.jpg

The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

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The National Bank of Belgium index for January 2026 rose to +4 from -1 in December, stronger than its November 2025 reading of +2. The survey value is exceptionally strong, lying in the top 6% of all observations back to 1991, even as the survey contains significant variations that range from strong to quite weak across its various components. What is most notable is that the index itself is extremely high-ranking; the current situation appraisal is also quite high-ranking; and, that the forecast for unemployment embedded in this survey is at a 35-year low. Considering current circumstances, against the events of the last 35 years, that's a rather remarkable finding especially considering the world situation.

**The times, they are a changin’ was Dylan 50 years early?** 
These have been remarkable times in a number of different ways with a clear transition from the circumstances of the post-war period under way. The solidarity of the NATO alliance is clearly in a situation in flux, revealed since Russia invaded Ukraine. Prior to that, the Europeans had resisted putting more money into the NATO pot as the United States had been frantically asking them while it funded most of the security umbrella. Now, in the wake of these new events, and with the changes to the global stage wrought by climate shifting, the U.S. finds Greenland to be a more important piece on the geopolitical chess board and wants to have more say there in order to protect its own flank as Arctic ice packs recede. This is after a period when NATO basically failed to engage in the front-line protections of its own doorstep that the U.S. had thought were necessary. Not surprisingly, the U.S. found that whole episode unsatisfactory and is now reluctant to give up control to NATO of what it regards as the protection of its own back door for the area around Greenland. But at last, Europe and the U.S. appear to have a deal or the makings of one, so, stay tuned. Maybe all civility is not lost.

**Geopolitical shifts meld with economic issues to change the landscape**
Geopolitical shifts are part of the problem because geopolitics and economics help shape one another. And there has been a great deal of economic turmoil as well. The U.S., after reassessing the Post War order, is bringing back to life tariffs, in order to try to get economic leverage after running 33 consecutive years of current account deficits under what people want to call a free trade system. The U.S. finds itself with a still very overvalued dollar and in a situation where its current account deficits are poised to continue to run high and perhaps get higher. Economists say tariffs are not the solution, but maybe they ARE the wake-up call that will lead to a solution? Europeans have also shifted to embracing a larger and larger government sector and ever larger fiscal deficits and more fiscal debt while absorbing migrants. This is constraining its ability to have any kind of a flexible macroeconomic policy and is a severe problem already for the U.K. and France. And these changes are wreaking havoc with what has been a very solid post-war Atlantic alliance.

**Views change**
But the changes that the U.S. has pushed on to the system from its geopolitical adventurism to its use of tariffs and other strong rhetorical comments have led economists to focus on the elevation of uncertainty in the economic system. Elevating uncertainty has an adverse impact on the economy and on growth. I mentioned this with the obvious caveat that this warning by economists seems to have been completely wrong. U.S. growth has turned out to be quite resilient and even strong. It is not the only adamant position that has proved to be wrong and malleable. Despite the reality of climate change, the view that once took carbon as the main and unequivocal climate change agent, itself is shifting. Opposition to carbon has dwindled, more as the U.S. is embracing nuclear power. Artificial intelligence is becoming a strong bet for stronger growth in the future, and this explains why there have been so many shifting views on energy since artificial intelligence requires massive amounts of energy and would make it impossible to make progress on carbon and to push ahead with the AI agenda at the same time. So, instead of delaying AI, the view on carbon had to go. So much for ‘science.’

**Why are Belgians so satisfied?**
The finding that in Belgium consumer confidence has risen sharply in this environment and fears of unemployment are the lowest they've been in 35 years is another shocking development in this pantheon of incredible and shocking changes. As the above discussion points out, a lot is changing and NATO is at odds with the U.S., its lynchpin. Yet, there is no clear increase in uncertainty in Belgium, while they maybe more in Brussels.

**The Belgian Survey: strong despite waffles**
Belgians do not read the economic situation over the next 12 months as that strong at a reading of -29 on the survey; it has weakened over the last few months, and the economic situation assessment is only at its 8.3 percentile, an extremely weak standing. Price trends are the opposite; they have eased somewhat in the recent months, but over the next 12 months the assessment still has a top 14-percentile evaluation. It is in this context that the unemployment forecast, which is the lowest in 35 years, emerges as surprising. The environment to make major household purchases over the next 12 months is only a mid-range at a 45.7 percentile standing. And people rate their financial situation over the next 12 months slightly better than at the end of last year but at only a 34.2 percentile standing. However, the appraisal of the current situation moved up sharply in January and has a 97.7 percentile standing, which is extremely strong.

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**Low unemployment fear spurs confidence**
The reason for consumer confidence to be strong is clear when you see how low concerns are about unemployment. But it's hard to understand why concerns about unemployment are so low with the rest of the economic metrics so varied in the survey. This is especially true with Belgium nestled in the heart of Europe and all of these concerns between the U.S. and NATO swirling around as well as a still very hot war occurring on Europe's border between Ukraine and Russia. Meanwhile, the U.S. position about this war continues to seem to back Ukraine a lot less than it should.

**Belgium is a good bellwether**
The Belgian survey is not the most important bit of economic activity. Belgium is not an extremely important country in Europe, although it's in the heart of the European Union, a member of the European Monetary Union, linked closely to Germany, and to other key European economies through trade, so that its performance likely is a good reflection of what's going on in Europe. It is not a European border country. It is in the heartland of Europe. That may explain a little bit why Belgians are not perhaps as nervous as Poles, are or Finns or the small Baltic countries, and others, with potentially more border proximity and vulnerability to the Russia-Ukraine conflict.

**Belgian optimism flies in out of the blue**
This is an observation. I think it's the kind of observation in this world economy that we find striking and unusual and will bear some further watching and some watching of other similar readings in Europe to see if there's evidence that there's some kind of new resilience that we might have missed. Economists seem hung-up broken-record style on uncertainty. Certainly, there's something here that economists have missed who have only seen these new actions by the U.S. as creating more uncertainty since we do not know what the new Greenland deal is. And uncertainty should create more adversity for growth except that it hasn't worked out that way. And it's a reminder that separating economics from geopolitics may take more than a crowbar. And also that uncertainty comes in many shapes and sizes while some may argue that there still is not a Greenland deal, what we see is a lowering of the temperature, a calming of the rhetoric and a sense that the parties have a horse trade they think they can do to resolve their differences. And while there is still uncertainty, there is also clear progress and a clear reduction in risk. Still, the times are changing.

Economy in Brief: 2009

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